Debunking the happy headlines about job growth

Summary: The news overflows with chaff about the economy. It’s great! It’s a recession! Neither is true. Since the 2009 trough we have had growth — but unusually slow growth. Here we look at one measure of growth: jobs, going in slow clear steps from the wonderful headline news to the grimmer reality.

Let’s start with the good news and work through to the grimmer reality.

Here’s the good news that excites Janet Yellen:
job openings as a percent of total non-farm jobs are back to their 2001 peak!

The bad news:
the rate of hires (people actually hired as percent of total jobs) has climbed,
but only back to the average of the previous expansion (2002-2007)

The very bad news:
the faster rate of hires has not boosted the rate of job formation (payroll growth).
It’s just faster turnover of jobs.
This shows percent growth in jobs. It’s usually expressed in thousands because it looks better (because our population grows over time).

Confirming the bad news (no tight labor markets):
hourly wages of workers are growing even slower than in 2001-2007.
The 2001-2007 expansion was called “jobless growth”.

Another perspective on the “best job market in decades”:
monthly change during the past year of non-managers’ real hourly wages

Real average hourly earnings for production and nonsupervisory workers increased 1.5% SA YoY in April. The increase in real average hourly earnings combined with no change in the average workweek resulted in a 1.6% rise of real average weekly earnings. Source: BLS.

The worst news: for the first time since the 1930s
The number of jobs (blue) grows slower than America’s working age population (red).
Index: 100 = March 2001 (the job market peaked before the tech recession).

Conclusions

Jobs and wages are the key not just to prosperity in America, but to social and economic stability. Growth of an underclass — people without secure jobs, in part-time contingent minimum-wage jobs — drives a wide range of social ills. This is incompatible with our political institutions, and tangible evidence of our failure.

For almost a generation we have tried a wide range of economic nostrums: tax cuts for the rich paid for by government borrowing — massive growth of household, business, and government debt — wild fiddling with the knobs of monetary policy (zero interest rates, massive expansion of the money supply, quantitative easing) — and even foreign wars. Nothing has worked.

America is changing into something else. But the political machinery the Founders bequeathed us remains powerful, needing only our participation to make it work (voting is the starting point of citizenship, not its essence). The clock is running. Time is not our friend.

Why America’s growth is slowing, and a solution — Imagine bringing June Cleaver from her 1957 home to today’s equivalent; she’d be astonished at our lack of progress. Look at how we’ve underperformed futurist Herman Kahn’s 1967 expectations for the year 2000.

6 thoughts on “Debunking the happy headlines about job growth”

How much of this so called stagnation is caused by demographics? We are just a few years away from having the 25- 54 age group being larger than the boomers. Will that reduce or speed up the rise in inequality?

Is inequality a bigger threat than the crumbling infrastructure? I think not. And I suspect if we solve the infrastructure dilemma, that maybe the inequality problem becomes less important.
Apparently we have excess labor, excess steel and I presume plenty of cement and stone. Seems like the federal government could somehow just marshall all those resources to get the job done. We did it in WWII, why not now?